Correlation Between Gabelli Healthcare and Sprott Focus

Can any of the company-specific risk be diversified away by investing in both Gabelli Healthcare and Sprott Focus at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gabelli Healthcare and Sprott Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gabelli Healthcare WellnessRx and Sprott Focus Trust, you can compare the effects of market volatilities on Gabelli Healthcare and Sprott Focus and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gabelli Healthcare with a short position of Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Healthcare and Sprott Focus.

Diversification Opportunities for Gabelli Healthcare and Sprott Focus

-0.65

Correlation Coefficient

Gabelli Healthcare  Sprott Focus

Excellent diversification

The 3 months correlation between Gabelli and Sprott is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gabelli Healthcare WellnessRx and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust and Gabelli Healthcare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gabelli Healthcare WellnessRx are associated (or correlated) with Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Gabelli Healthcare i.e., Gabelli Healthcare and Sprott Focus go up and down completely randomly.

Pair Corralation between Gabelli Healthcare and Sprott Focus

Considering the 90-day investment horizon Gabelli Healthcare WellnessRx is expected to under-perform the Sprott Focus. But the stock apears to be less risky and, when comparing its historical volatility, Gabelli Healthcare WellnessRx is 1.09 times less risky than Sprott Focus. The stock trades about -0.07 of its potential returns per unit of risk. The Sprott Focus Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  758.00  in Sprott Focus Trust on September 3, 2024 and sell it today you would earn a total of  62.00  from holding Sprott Focus Trust or generate 8.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gabelli Healthcare WellnessRx  vs.  Sprott Focus Trust

Gabelli Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gabelli Healthcare WellnessRx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gabelli Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Sprott Focus Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Sprott Focus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gabelli Healthcare and Sprott Focus

The main advantage of trading using opposite Gabelli Healthcare and Sprott Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gabelli Healthcare position performs unexpectedly, Sprott Focus can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sprott Focus will offset losses from the drop in Sprott Focus' long position.

The idea behind Gabelli Healthcare WellnessRx and Sprott Focus Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.